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Proactive Spreads, July 16th, 2018 – LULU, IBB, ADBE, RUT

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The S&P has managed to hit and hold 2800. This is not bearish action. I expect a move to 2850… it probably won’t happen overnight, and we’ll probably see some reversion before it happens.

Current price action is not supportive of the more popular bearish narratives. Large cap financials have caught a bid, emerging markets aren’t falling apart, treasury yields are back at levels from January… it’s all fairly healthy.

Sure there’s some weakness in large cap tech. NFLX earnings out and the stock is down 50 points. Probably needed it.

In fact, there are many, many stocks on my watchlist that have earnings up on deck so they are “no plays” until after earnings. There will be some great opportunities in those names over the next few weeks.

For now, we’ll focus on names with earnings already out as well as some index plays.

Trade #1: LULU

Obvious compression breakout above 130. I think you can get away with getting long here, but what I think is a cleaner setup is to wait for the “rug pull.”

The first move under the June range will most likely be bought up, so that’s where the best risk/reward is.

Trade Setup

Expected Price: 122

Sell to Open LULU Sep 105/100 Put Spread

Tier 1: Enter at 0.70, Exit at 0.20

Tier 2: Enter at 1.00, Exit at 0.50

Tier 3: Enter at 1.30, Exit at 0.80

Trade #2: IBB

Stellar move in biotech. A lot of large cap names like BIIB, GILD, and AMGN have broken out of more constructive bases.

I want to see a gap fill from a few days ago to initialize a position.

Trade Setup

Expected Price: 116

Sell to Open IBB Sep 110/105 Put Spread

Tier 1: Enter at 0.70, Exit at 0.20

Tier 2: Enter at 1.00, Exit at 0.50

Tier 3: Enter at 1.30, Exit at 0.80

Trade #3: ADBE

We’ve already pulled out some nice profits out of this name from the dip in June. I want to get involved again, but only if the major support is tested. A bigger selloff in tech would do that.

Trade Setup

Expected Price: 235

Sell to Open ADBE Sep 210/205 Put Spread

Tier 1: Enter at 0.70, Exit at 0.20

Tier 2: Enter at 1.00, Exit at 0.50

Tier 3: Enter at 1.30, Exit at 0.80

Trade #4: RUT

 

Just in case the market gets a little more loose, I want to be prepared. Looking at the most recent support level as a fresh entry.

Trade Setup

Expected Price: 1636

Sell to Open RUT Sep 1540/1535 Put Spread

Tier 1: Enter at 0.75, Exit at 0.25

Tier 2: Enter at 1.05, Exit at 0.55

Tier 3: Enter at 1.35, Exit at 0.85

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